Total Rebalance Expert, or TRX, is widely known for its impeccable portfolio rebalancing and tax management features. After all, TRX was born from Sheryl Rowling’s own need for an extremely precise tool to manage the demands of her RIA and CPA businesses.
But what escapes many advisers is the company’s culture born from the land of eternal summer, aka San Diego.
TRX lacks the institutional swagger of its larger counterparts, including iRebal from TD Ameritrade Institutional and Tamarac Advisor Rebalancing from Envestnet, but focuses on delivering value with its product line, where attention to detail and accuracy down to the penny and fractional share is vital.
So what happens when TRX decides to let its collective hair down and focus on education and value for its customers? You get TRX Unplugged.
Watch the coverage of TRX Unplugged above to gain a sense for how the company supports its advisor relationships and courts prospective firms with its deliberate relaxed attitude and atmosphere.
On today’s broadcast, the SEC fines an RIA for cybersecurity oversights, learn the steps you should implement to fight ransomware, and RightCapital is the newest startup in the financial planning software marketplace.
Today’s episode is brought to you by True North Networks, a leading provider of managed IT, hosting, and security services to financial professionals. With the introduction of SecureWorkplace, True North Networks helps advisors combat cybercrime with industry leading technology, monitoring, and employee awareness training.
And if you sign up for SecureWorkplace in October, you’ll receive a free firewall valued up to $2,000. Learn more about True North Networks and SecureWorkplace today by visiting fppad.com/truenorth
[I’ve been under the weather for a few days, but I’m back with this week’s top story that comes from the Securities and Exchange Commission, as the industry watchdog recently settled charges with a St. Louis-based RIA for failing to establish cybersecurity policies and procedures. In its settlement, the SEC said the firm “failed entirely to adopt written policies and procedures reasonably designed to safeguard customer information” and the regulator assessed a $75,000 penalty. As the result of a breach in July 2013, hackers gained access to personally identifiable information for roughly 100,00 individuals.
But the silver lining, if there is one, is that the SEC said that no clients have suffered financial harm as a result of the breach. Well, not yet, at least.
So this is your wake up call if you’re behind on establishing your own cybersecurity policies. You need them, and you need to periodically test them, or you may subject your firm to similar consequences.
Once again, I’ve linked the SEC’s most recent cybersecurity guidance in the show notes or consider hiring a security expert for RIAs like Itegria, Envision RIA, External IT, True North Networks, Right Size Solutions, and others.]
[Next up is more news about cybersecurity, as Shareholders Service Group president Dan Skiles recently addressed the rise in ransomware attacks on RIAs. Skiles notes that RIAs typically come across ransomware in a phishing email or a rogue file attachment, and once it’s mistakenly activated, the ransomware holds your computer and your files hostage unless you pay a ransom amount in bitcoin to unlock everything.
Obviously it’s best to never launch programs from unknown sources, but if ransomware does get activated inside your firm, Skiles recommends you isolate the computer that was attacked and work with an experienced IT professional to limit the damage. Arguably the best protection against ransomware is to have a fully-functional backup of all of your files, so you can literally throw your infected computer in the trash and start from scratch by restoring your files from a good backup.
It’s best if the ransomware never gets launched in the first place, so keeping your cybersecurity policies up to date AND offering periodic training to your firm’s employees will go a long way in protecting the information your clients trust you to keep safe.] When your firm is hit with a ransomware virus, try these steps first
[And finally, I’m wrapping up with a new startup called RightCapital, which announced the introduction of its eponymous financial planning software at the XY Planning Network conference in Charlotte last week. RightCapital joins Advizr, another planning software startup I’ve covered before, to offer an intuitive and attractively-designed platform as an alternative to veteran providers like MoneyGuide Pro, eMoney, and Advicent.
You’ll have to test drive RightCaptial to see if its planning capabilities are up to your standards, but with built-in account aggregation, integrations with Morningstar, Yodlee, and Redtail, and a price tag under $1,000 a year, RightCapital deserves a spot on your radar screen, especially if financial planning is going to play a more prominent role in your business.] Newly launched service provider RightCapital thinks it has created a better mousetrap and is undaunted by the hypercompetitive market
Watch FPPad Bits and Bytes for September 25, 2015
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Orion Advisor Services hosted Fuse 2015, a developer event the company organizes to encourage development of new apps and solutions for advisors and to increase the quantity and quality of integrations with Orion.
I created three videos from Fuse 2015 to get you an up close look at what happens at this exciting developer event.
As we make our way up the east cost, we could not turn down the opportunity to meet with Michael Kitces, a prolific contributor to the financial planning industry. We met at his home to talk about what drives him to create so many educational and business resources for financial advisors.
CHAPTER MARKERS:
0:10 FPPad Tech Tour Intro
1:05 Tell me about your passion for supporting and educating financial advisors
3:46 Why have you created so many businesses to help advisors?
6:20 What’s a typical day like at Nerd HQ?
8:00 The official Kitces blue-shirt uniform back story
8:58 THE BLUE SHIRT VAULT REVEAL!!
11:48 On the way to the airport talking about balancing business demands
13:04 What’s part of your future in this industry?
15:40 Why do you create SO MUCH content?
17:47 Your support for the Foundation for Financial Planning
As we make our way up the east cost, we could not turn down the opportunity to meet with Michael Kitces, a prolific contributor to the financial planning industry. We met at his home to talk about what drives him to create so many educational and business resources for financial advisors.
On today’s broadcast, Quovo raises $4.75 million to take on account aggregation, Advicent announces it will integrate Quovo into its planning software, and the industry is shocked as Edmond Walters suddenly announces his resignation as eMoney Advisor CEO.
So get ready, a Periscope edition of FPPad Bits and Bytes begins now!
Quovo, the leading financial data science company that addresses the needs of the wealth management industry, today announced that it has closed a $4.75M funding round.
Today Advicent Solutions, the leading provider of SaaS technology solutions for the financial services industry, announced its partnership with Quovo, an innovative financial data science company that addresses the needs of the wealth management industry. Quovo will provide account aggregation and direct custodial integrations to accelerate the integration strategy of Advicent Solutions and the convergence of personal financial management (PFM) and financial planning.
eMoney Advisor’s founder and CEO, Edmond Walters, stepping down from leadership role- Durbin, former President of Fidelity’s RIA custody unit, to oversee transition- eMoney Advisor maintains commitment to serving wide range of clients
We left Charlotte, North Carolina behind and hit the road for Raleigh Durham, where we connected with Blane Warrene at the American Tobacco Campus. Blane’s involvement in financial services technology came quite by accident, so I asked him to tell me more about that over a cold glass of lemonade.
CHAPTER MARKERS:
0:08 FPPad Tech Tour Intro
0:44 What’s your back story?
3:10 Why are you an advocate for financial advisors?
4:30 Was Arkovi created intentionally, or was it a happy accident?
6:16 What happened after RegEd acquired Arkovi?
7:03 Why do you focus on cybersecurity issues for advisors?
8:34 What are you looking to do in your future?
9:58 Tell me something advisors don’t know about you.
11:04 AWESOME FLASHBACK PHOTOS!!!
11:57 Support for the Foundation for Financial Planning
13:29 Could I interest you in a music throwdown?
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We left Charlotte, North Carolina behind and hit the road for Raleigh Durham, where we connected with Blane Warrene at the American Tobacco Campus. Blane’s involvement in financial services technology came quite by accident, so I asked him to tell me more about that over a cold glass of lemonade.
On today’s broadcast, BlackRock plans to acquire FutureAdvisor, Salesforce previews it’s Financial Services Cloud platform, and a new white paper from Kaleido will tell you how you’re going to overhaul your business model.
Today’s episode is brought to you by Laser App Software, host of the brand-new Laser App Advisor Con event coming this October in Las Vegas.
This event will be led by top advisors, offering their own case studies and best practices on adopting industry-leading technology. Space is limited, so secure your registration today by visiting fppad.com/laserapp2015.
[Well, if you haven’t heard by now, the big news this week comes from BlackRock, as the world’s largest asset manager with around $4.7 trillion under management, agreed to acquire FutureAdvisor, the online automated investment service based in San Francisco. Let’s run the numbers: FutureAdvisor reportedly manages $600 million dollars, at 50 basis points, they earn, at best, $3 million in gross revenue, BlackRock reportedly paid something like $150 million for FutureAdvisor, so they paid 50, that’s right, 50 times gross revenue for the company. Wow. If it’s true, that’s like, way beyond Facebook and Twitter valuation territory! For an automated investment service!
So let me cut to the chase for your business. In a Wall Street Journal interview, BlackRock COO Robert Goldstein said that as BlackRock looks to “grow the company, our focus is going to be on working with our partners.”
In other words, financial institutions. Does that include you, the RIA? I don’t know. But it could be just institutions that compete with you day after day for client assets. Great.
So if this doesn’t light a fire under you to enhance your technology, improve your client experience, and clearly identify that your services go WAY beyond automated investing, I don’t know what will.
Look. I believe in you, I believe in the value you add for your clients, and I trust that what you is so much better than a five-question risk survey followed by an asset allocation recommendation.
But if you just sit there on your hands and do nothing, I just don’t see how your business stands a chance over the next five years.] BlackRock, Inc. has entered into a definitive agreement to acquire FutureAdvisor, a leader in digital wealth management.
[Next up is news from Salesforce, another industry behemoth, that this week announced it will release the Salesforce Financial Services Cloud in February 2016.
Claiming it’s the company’s “first industry-specific product,” (I guess they want to forget about Salesforce for Wealth Management?), the platform will offer a much more modern interface, secure private messaging with clients, and even integrations like Advisor Software for portfolio rebalancing and Yodlee for account aggregation.
But after closer inspection, Salesforce Financial Services Cloud seems positioned mainly for broker-dealers and large enterprise RIAs like United Capital, one of the firms who offered design feedback. Just look at some of the terminology they use: Book of business? Tear sheet? That should give you a clue.
So as an independent advisor, I don’t quite yet see you using something like this directly from Salesforce, but rather it will likely be an option offered by an institutional custodian or one of the many Salesforce overlay providers like Concenter Services, Navatar, Salentica, and more.] Salesforce, the Customer Success Platform and world’s #1 CRM company, today introduced Salesforce Financial Services Cloud, transforming the client-advisor relationship for the digital age.
[And finally, if you’re not already depressed by today’s broadcast, the researchers over at Kaleido, led by co-founders Angie Herbers and Kristen Luke, have noticed a disturbing trend among advisory firms. That trend is the rapid decline of profit margins.
Great. Just what you wanted to hear. But, I produce this broadcast to give you solutions to grow your business, so along with Kaleido’s research, the company issued a white paper describing what it calls the X-Cell Process™.
In a nutshell, the four-step X-Cell Process outlined should help you overhaul your service models so you can successfully incorporate automated investment technology into your business.]
This is not a paid endorsement, I just think it’s a useful resource for you to have, and all it will cost you is your email address.] Kaleido Inc., a practice growth agency serving independent financial advisory firms, has released a white paper entitled “X-Cell: The New Frontier of Advisory Client Service,” identifying growth inhibitors and other trends affecting the independent advisory community, as well as focused, tangible solutions.
In a press release this morning, BlackRock, Inc., the world’s largest asset management firm by AUM (source: relbanks.com) announced it has entered into a definitive agreement to acquire FutureAdvisor. Terms of the acquisition were not disclosed.
Let’s hit some fast facts again, shall we:
FutureAdvisor was founded in 2010 and had raised $21.5 million in four rounds (source)
FutureAdvisor had a reported AUM of $600 million in June 2015 (source), though their most recent SEC Form ADV from September 2014 reflected $232 million. This lagged online automated investment leaders Wealthfront and Betterment by approximately $2 billion as of August 2015
FutureAdvisor charged a Subscription Fee for the Premium Service of 50 basis points, making it more expensive than competitors Wealthfront and Betterment
Assuming a 50 bps fee on all $600 million results in gross revenue run rate, at best, of $3 million (remember AUM of $232 benchmarked in September 2014)
What does this mean for advisers?
Not much. Really. Return to your business.
But here’s the thing. BlackRock is an asset manager. BlackRock does well when its asset base grows. How can the company continue to grow its assets?
One way is to offer a new, simple, and attractive way for investors to automatically add their assets to low-cost, broadly diversified portfolios of funds and ETFs.
Enter FutureAdvisor.
A bonus for BlackRock is if the company can find a way to invest those assets into BlackRock-managed products.
Say, iShares ETFs.
What to do now
You come to FPPad for ideas on what to do with the technology in your business. So here’s what I think you should do.
Number one: Offer your own online, user-friendly interface
If the world’s largest asset manager sees the need to add a low-cost user-friendly online asset allocation tool to its arsenal, isn’t it time you have one for your business?
Prospects are comparing your capabilities to the services they see from Wealthfront, Betterment, FutureAdvisor, et. al., and if you come up short and don’t have an answer to their slick platforms, you’re probably viewed as a laggard.
Number two: Tell clients what you really do
Automated investment management is a commodity.
Anyone can get it from Schwab, Wealthfront, Betterment, FutureAdvisor. You could argue that the first mutual funds were the earliest automated investment management solution!
Sure, tax loss harvesting, daily rebalancing, and instant deposits are bells and whistles for automated investment solutions, and the results of whether or not those features actually result in any additional money in customers’ pockets is highly dependent on each customers’ personal situation.
But for you, as an advisor, investment management is just ONE of the things you do. It’s not the ONLY thing you do.
You do SO MUCH MORE.
So let clients know.
Even better, let your prospects know how much more you do.
You’re not justifying the fees you charge, you are reinforcing the value you provide by giving clients the service they need in ALL areas of their financial life.
You go WAY BEYOND investment management.
So do that. Tell clients what you really do, and why what you do goes way beyond automated investment management.
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